Pension Protection Act (PPA) of 2006
The Pension Protection Act (PPA) was signed into law by President Bush on Aug. 17, 2006. It has many implications on plan sponsors, financial professionals, and participants.
The bill is intended to strengthen workers' retirement security by:
- Changing defined benefit plan funding rules,
- Legitimizing cash balance plans,
- Encouraging automatic enrollment in 401(k) plans,
- Making permanent the improvements in the Economic Growth and Tax Relief Reconciliation Act (EGTRRA), and
- Allowing for the creation of a combination defined benefit and 401(k) plan, called the DB(k).
The bill also extended the use of corporate bond rates for funding through 2006 and 2007.
Some changes were effective immediately or in 2007, but most changes are effective with plan years that begin in 2008.
The Principal Financial Group® can help you navigate the implications of the PPA, especially as the IRS releases additional information in the future. Here are several helpful pieces to provide additional clarification:
- PPA Guide (PDF: 220 KB) - Outlines key provisions
- PPA Timeline of Provisions (PDF: 96 KB) - Indicates when changes take effect
- Additional Tools
- Automatic Enrollment Overview (PDF: 135 KB)
- Cash Balance Overview (PDF: 551 KB)
- DB(k) Overview (PDF: 154 KB)
- Vesting Overview (PDF: 131 KB)
- Press Releases - Learn more about how The Principal® is addressing PPA
- White paper - Is an expanded fiduciary role the right choice for financial professionals? (PDF: 101 KB)
- The Pension Protection Act of 2006: Planning for the Future (PDF: 567 KB) - article in the Winter 2007 issue of Benefit Edge.
- The Defined Benefit Impact (PDF: 567 KB) - article in the Winter 2007 issue of Benefit Edge.
- Investment advice and The Pension Protection Act (PDF: 950 KB) - article in the Spring 2007 issue of Benefit Edge.
- Defined Benefit Funding Rules - Pension Protection Act (PDF: 950 KB) - article in the Spring 2007 issue of Benefit Edge.
- Defined Benefit Plan: Prepare Now for 2007 Funding Changes on the Horizon (PDF:189 KB) - article in the Summer 2007 issue of Benefit Edge.
Have complex questions about the effects of this legislation on your plan? Our Comprehensive Consulting Services can help.
